Is your business ready for Lean?

Most business leaders wish to see their business performance continually improve and most of them, at some stage, attempt to implement a Lean improvement programme. Additional ‘Lean expert’ resource is often engaged to provide leadership, and the programme will generally be launched with a fanfare extolling the virtues of Lean and it’s various tools. Early successes are delivered and the programme gains momentum to the point that most employees begin to believe in Lean as performance is seen to improve.

Around 12 months into the programme, things start to get a little more difficult and the rise in performance begins to stall at best and fall at worst. The program is put in jeopardy due to the misconception of management that the program has failed when in fact it is purely a question of traction. The general train of thought (or excuses) will be that “Lean doesn’t work here” for a variety of reasons – “we don’t make cars” or “we have a complex business” or “we have very skilled people who can’t be standardised” etc.

Over the next 12 months or so the programme will suffer a slow and ‘bloody death’ as first, the believers dissolve away (as a result of their leadership no longer being involved or positive about the programme), and subsequently the Lean experts are reassigned to ‘real’ jobs.

It is very unlikely that any evaluation will be done into the validity of the excuses above.

All of the above was brought into focus for me last weekend when I was talking to an old friend who now runs a large business and he asked what I could do to help. After the initial pleasantries the conversation went something like this:

How do you measure your operational performance today?

Our key metrics are labour efficiency and profitability, and we also track Material launch to schedule amongst other key planning requirements

What do your shareholders think of the business performance?

To be honest, they’re not very happy despite our continued profitability.

Why aren’t they happy?

We never have the free cash to pay them a dividend, so I suppose I’d be unhappy as well.

How do your customers rate your delivery performance?

They generally rate us poorly, but our analysis shows that we have a 90% D1 performance.

What does D1 mean?

Not really sure but it’s something like the percentage of product that was ordered for this month which will be delivered this month.

What would you say if I offered to help you to significantly improve both your cash situation and your delivery performance to 100% OTIF?

What’s OTIF? How would you do that? Are you claiming to be a miracle worker?

On-Time, In-Full. I wouldn’t but you could! No!

Where would you/ we start?

You would start by adopting Lean KPI’s such as Product Lead Time (The time it takes for a product to pass through each process from start to finish), Throughput/Man.hour (Added Value per DIRECT man-hour), Operating Expense (All other direct operational costs) and OTIF for each shipment.